The excitement around investing in data analytics is firmly grounded in reality, underscored by rapid advances in artificial intelligence (AI) and the ever-increasing flow of data.
Businesses across the spectrum are eager to leverage real-time data to power their AI systems, with the goal of unlocking significant business benefits. Data analytics specialists play a crucial role in both streamlining the process of feeding new data into AI engines and enabling organizations to make data-driven business decisions.
On that note, let me introduce you to two fantastic investment opportunities in today’s data analytics industry. Palantir (PLTR -2.56%) is an innovative, cherished market with room for growth. IBM (IBM 3.15%) is an old-school tech titan with new life in the age of AI.
Palantir: richly valued for good reasons
Data analytics expert Palantir is not a cheap stock. The stock price has more than tripled in the past year, and Palantir trades at nearly 300 times earnings or 27 times sales.
With these high valuation ratios, one might expect Palantir to be a small-cap startup with thin profit margins supported by modest but soaring sales. But its annual sales surpassed the $2 billion mark last year, and Palantir’s net profit margin stands at a solid 9%. Year-over-year revenue growth stalled at 17% in 2023, down from 24% in 2022 and 41% before that.
Yet Palantir has earned its nosebleed valuation by charting a clear path to continued growth.
The company began as a specialist in defense solutions. It’s still a big business, but Palantir is also expanding its reach to commercial customers. Commercial sales are growing faster than government revenue, accounting for 45% of total sales last year. And change is accelerating now. Looking ahead to fiscal 2024, Palantir management expects total revenue to increase approximately 20%. However, commercial sales in the United States are expected to lead with a jump of “at least 40%.”
Keep in mind that government contracts often come with lower profit margins than business-to-business services, and you’re looking at a promising recipe for profitable growth. Palantir’s business is expanding in a more lucrative direction as the company becomes a leading provider of AI-based data analysis tools. Yes, AI analytics can optimize data flow who becomes the next generation of machine learning Or large language model (LLM) AI Platforms.
Palantir’s commitment to advancing innovation in AI and machine learning places it at the forefront of analytics technology, enhancing its platforms with AI-driven insights and predictive analytics. This commitment not only enriches its service offerings but also enables customers to get the most out of their data in a sophisticated and impactful way. The scalability of Palantir’s solutions makes military-grade data analysis accessible to everyone, allowing organizations of any size to benefit from the company’s cutting-edge AI technology.
With these strategic advantages, Palantir Technologies has carved out a leadership position in the data analytics and AI industry, demonstrating a clear path to continued growth and innovation. So the stock may be expensive, but for all the right reasons. The company is expected to evolve into roomy boots over time, supporting its market value with stronger earnings and continued top-line growth.
Don’t forget IBM
Big Blue rarely comes up in the AI conversation, and like most investors prefer to focus on newer, newer names. A shorter operating history may be acceptable as long as growth looks good, right?
Well, good old IBM actually combines the best qualities of an experienced tech giant and an exciting AI expert. The company is entering an impressive growth phase, fueled by cloud computing and AI services, which is expected to generate significantly higher sales and free cash flow over the coming years. But most investors have yet to notice this unstoppable growth spurt, so the stock trades at modest valuation ratios of 24 times earnings and 2.9 times sales.
If Palantir’s valuation is too rich for your blood, IBM could be investing in AI at a great price you look for.
And AI-powered data analysis plays a major role in IBM’s future growth. It is powered by the powerful Watson AI platform and its data analytics services are the cornerstone of IBM’s offerings in the cutting-edge technology landscape.
Watson AI uses advanced machine learning and natural language processing to analyze large data sets, enabling businesses to discover insights, predict outcomes, and make data-driven decisions with unprecedented accuracy and speed. previous.
This sounds a lot like Palantir, but that’s not the whole story. Beyond this fundamental analytical prowess, Watson’s applications cover a wide range of industry-specific capabilities. In healthcare, it helps diagnose illnesses and recommend treatments. In finance, IBM’s Watson improves risk management and customer service. And that’s just a brief overview of a strong sector portfolio.
IBM complements Watson’s AI capabilities with a robust suite of analytics tools and cloud services. Together, these tools provide a complete ecosystem that supports the entire data lifecycle, from collection and storage to analysis and visualization. This holistic approach helps customers get the most out of their data, driving innovation and efficiency across their operations.
Investors began opening their eyes to IBM’s AI-driven prospects around January’s earnings report. The stock has gained 20% in three months and 30% in six months, but IBM shares remain cheap compared to other AI investments. If you don’t already have Big Blue stock in your portfolio, now would be a good time to pick up a few stocks at a low price. I don’t know how much longer the cheap stock prices will last.
Image source: Getty Images.
If you believe in the transformative power of AI and data analytics, Palantir and IBM deserves a place on your watchlist. The market is constantly changing and sometimes the best decisions are made when others aren’t paying attention.
